A mediation on Youth Day: 16 June, 2015

What black power can we rally under a black majority government, when a full 40% of South Africans are unemployed?

Yes, a day for black power was the rallying call of the students of 1976 (today it is somewhat more properly known as Youth Day). But the youth have little to celebrate, when large numbers of them are unemployed.

While youth unemployment in South Africa is acute, unemployment in general appears to be one of South Africa’s most intractable problems. And in contemporary South Africa, even those who do have work are increasingly faced with the reality of the casualisation, informalisation, and the temporary nature of work that is becoming more dispersed with the outsourcing of particular roles and functions in workplaces.

This kind of regime benefits employers and owners, to be sure. They are able to cut input costs and save on wage bills and benefits paid to workers. It may have some ameliorative effect on those who are temporarily out of work who manage to get some of these jobs, but increasingly, it does not benefit society at large, nor does it tend an economy nearer towards full(er) employment.

How did we end up here?

History and past legacies matter, no doubt. As does a politics and governance regime characterised by conflict, corruption, paternalism, patronage and hubris. Add an inappropriate policy mix and lackluster, often uncreative government performance in critical areas of the economy together with polarising and antagonistic race relations, and mutual suspicion between an ineffective and sometimes corrupt state and a myopic, collusive private sector.

Part of this mix is the fracturing and fragmentation of a traditionally strong union federation, Cosatu, which traditionally organised workers in a social movement unionism that adopted both shop-floor issues and broader community and public-interest campaigns. Its decline has heralded both a more narrow economistic approach in the remnants of its core and the rise of more narrow economistic “independent” unions in its wake.

This is likely to create an unstable worker-employer bargaining relationship and render the collective bargaining system as a whole, unstable. A change in the character of Cosatu, with a greater organisation in the public sector is likely to see the emergence of an even more myopic business sector, with a more populist government attempting to discipline it in the absence of cohesive labour pressure. This makes for a mix ripe for social and political combustion.

The implications of the recent #RhodesMustFall campaign, and the symbolism of students whipping and beating the statue of Cecil John Rhodes as it was being removed, should not be lost.

An agenda and demand for change has been set by communities in the on average 500 protests a year over the last decade in largely African communities; there are remarkable signs all over the society, pointing to ineffective government and poor and deteriorating social relations.

Our social crisis is a poignant reminder of the unresolved issues of the inherited racial patterns of exclusion and economic distribution in our society, and the conundrum of race, (lack of) recognition of the influence and impact of the past, and the redress and new nature of reconciliation measures required to address it.

Are we completely lost?

The reign of error expected in some quarters since Jacob Zuma’s ascendancy to the presidency of the African National Congress in 2007 and the country in 2009, has not materialised.

Mercifully, successive ministers of finance have had budgets to announce and South Africa has not (yet) spent its way into oblivion. Neither has it been saved from the vicissitudes of the global recession. Although its savings have come in the form of a modest surpluses, these have been reversed since 2009 into modest deficits that has allowed the South African economy to withstand the shocks of a global recession.

But legal and regulatory uncertainty, coupled with the infrastructure and energy constraints, as well as a return to a focus on mining, extractive and other primary sectors in the economy, has served to undermine strengthening diversification and the development of areas of comparative and competitive advantage in the South African economy.

That it is not all lost, is, however, not solely attributable to a Zuma government. The modest successes in South Africa, such as they are, find their roots in a policy trajectory and tripartite social dialogue processes established before the Zuma administration, much of which his two successive administrations appear to have continued.

Do we need to do something different now?

There is an entrenched orthodoxy that requires everyone to be on its right side. It bellows the mantra of labour market over-regulation, and over-regulation in society generally, together with labour-market inflexibility and the high cost of doing business.

While moralising in tone, it is ambiguous about the immorality of poorly paid, exploited and alienated labour and the conditions under which workers work. Nor is it alive to the fact that it is tight regulation that saved South Africa from the complete ravages of a global financial crisis emanating from the unregulated excesses of financial institutions in the developed world.

There, the systemic and structural edifice of the “global market” fractured, because of the untrammeled avarice of individuals and firms operating in the tragic absence of regulation. The absence of regulation tampering the irresponsible extension of credit on capital markets and the scandalous misuse of financial instruments manipulated the structural designs (or lack thereof) of the imperfect market.

It is precisely this toxic mix – of low corporate tax rates, low high-net-worth individual marginal tax rates, flexible labour markets, deregulated financial markets – that mainstream economists appear to advocate for South Africa.

What this orthodoxy does not ask, is what moral hazards are inscribed in this regime? Quite apart from its moral blindness, this orthodoxy is unable to explain the curious phenomena of South Africa’s jobless growth and increasing inequality in the face of GDP growth, other than attributing it to inappropriate policy or large scale mistrust of the government. It is simply blind to the fact that companies in the private sector in South Africa have learnt how to do more, with less.

The relationship between inequality and growth is determined by employment and remuneration behaviour of the labour market. Strong job growth with real-wage responses in proportion to growth have an inequality-reducing effect. Maintaining a social wage and welfare-ist set of interventions serves to alleviate the substantial absolute poverty that continues to exist. This regimen, it is clear, needs to be maintained, with a greater number of jobs created – but these need to be linked to fair wages.

At present, the society is simply not creating enough jobs. In a context of increasing inequality, it is clear that modest GDP growth is being fuelled by government spend and the private sector extracting a greater surplus value from its existing pool of labour, or through mechanisation and technisation in the workplace – not through expanded job creation.

Where real job creation has happened, it is in government. But actual job creation driven solely by the state is unsustainable. Evidently, it is the private sector that needs to do more to create jobs. When growth over the last two years (2013 and 2014) averaged close to 2%, formal-sector jobs grew by a measly 0.5%. This, in a context where foreign direct investment (FDI) was $10-billion in 2013, and $2.2-billion in the second quarter of 2014 alone, with South Africa rated the 13th most attractive FDI destination, globally.

How do we make sense of these curious contradictions of FDI attractiveness, with increasing joblessness, output and production growth unaccompanied by jobs growth and labour absorption? Evidently, with the increased financialisation of the economy, inflows and growth may be high, but they have not translated into jobs growth.

Redefining the policy mix

So the first intervention that may be required is that the network of institutions and matrix of policies need to align with symmetries to serve society and economy. In every instance, the question to be asked is what good does the policy and its attendant institution promote, and what harm does it prevent.

This kind of government intervention in the economy is necessary but needs to be prudent and appropriate. Expanding a government’s scope and scale is counterproductive if it is unable to realistically extend its reach in service of stability, growth and job creation.

While the continued role of social dialogue institutions (such as the National Labour and Economic Development Council, Nedlac) are unclear, it is probably still likely that they can play a role in striking agreements about social wage benefits through the operations of the National Health Insurance and the setting of a bargained minimum wage tied to productivity and performance.

If society and labour expects trade-offs from business, labour is going to have to make trade-offs of its own. A commitment to increased performance and productivity is one such example, especially in the public sector.

The role of social-dialogue institutions can be extended to areas where bargains can be struck with the private sector in convincing it to deploy some its estimated savings of R340-billion in service of jobs. But this can only happen in a context of a re-establishment of trust and confidence towards a consensus-seeking and conflict-avoidance approach between the state and the private sector.

There is every reason why business should make trade-offs in the current context to ensure its own future sustainability and profitability. While this may come as a tax on hyper-profitability in the short term, it will even out through the benefits of long-term, sustainable revenue growth and profitability. A failure to do this will likely see us staring a more populist political path from government in the face.

The private sector may have to bite the bullet of a government that may be forced to adopt a more prescriptive policy path, requiring prescribed minimum re-investment thresholds in the economy for the purposes of market development and expansion, research and development for new products and services, as well as the creation of minimum number of jobs per sector, per specified period.

Obviously, this can only happen if there is in fact greater production and manufacturing in South Africa.

In addition a mix of further measures may be necessary to stimulate job creation.

With an over-reliance on imports, South Africa may need to consider a policy of import substitution which balances the continued need for imports with moderately higher duties, tariffs and taxes on imports to ring fence revenue from these to subsidise and incentivise local manufacturing, industry and economic diversification.

In addition, stagnant capital reserves need to be made more productive and the tide of capital flight stemmed. To that end a re-imposition of prudent exchange controls may need to be reintroduced at levels that balance societies need for capital retention with the need for investment outflows and maintaining confidence-boosting signals in the economy.

Why we need to rebuild trust

But none of this can happen in the absence of trust. At present, there is a decline in the level of public trust and confidence in public institutions. This is a fancy way of saying that the people don’t trust the government.

They don’t do so for good reason. For one, the question of whether a president is entitled to spend R280-million on security and comfort has been placed on the ethical back burner.

Parliament appears to have given up on a robust law making and oversight function and has been reduced to a game of silly buggers. The police are ineffective and the courts slow and tardy. Political meddling in the prosecutions and revenue service indicate the early hollowing out of state institutions.

The state regularly flouts its commitments, implements policy in a haphazard and unaccountable manner with insufficient oversight and a lack of enforcement and effective sanction in instances of irregular and even illegal behaviour. Corruption is rife and the rule of law is regularly undermined. The governing party appears to have lost its moral compass and the opposition appears to exist for its own sake.

We have every reason not to trust business. The statistics cited above, with respect to business’s inability to create jobs, even in periods of high growth, is sufficient as an eroder of trust. As displayed in the price fixing, collusive, anti-competitive behaviours and practices of business – and acutely demonstrated in the instance of Marikana – where shareholders are not prepared to stick to their own commitments, and appear wantonly desirous of only greater dividends at any and all costs, society has few reasons for trust.

In society, we have good reason not to trust each other anyway. In spite of increased racial polarisation and well-known incidences of racism, it is sadly amount black South Africans that features of the fourth world are most persistent. This fourth world, where abnormality pretends to be the norm, has the first world, its privileges and excesses, simultaneously co-existing with the third and its deprivations.

But alongside the third world’s quadruple evils of chronic socioeconomic underdevelopment, high unemployment, deep poverty and extreme inequality, South Africa presents the blight of intolerable levels of structural racism, extreme criminality, rape (including that of children and the elderly), murder, and social violence. Incivility and inhumanity are this fourth-world norm.

Without a commitment to some serious societal introspection, bold policy, consensus-seeking and compromise on everyone’s part, and some creative thinking, we likely looking at a society on the brink of combustion. We need to show that black power can indeed do things differently.

ebrahim fakirEbrahim Fakir is an independent political researcher and commentator. He was the 2014 Ruth First Fellow at the University of the Witwatersrand. 
Featured image: By Nicolas Raymond, via Flickr.